Supply, meet Demand. Great. Now meet my friends Foreclosure, Greed and Panic.
Great news for anyone renting, accumulating cash and wanting to buy a home in Denver in two years. Bad news for anyone who owns a home in Denver.
Record inventory to pull down prices in area, experts say
The record number of unsold homes in the Denver-area market topped 30,000, and the inventory glut is expected to drive down home prices in an already soft market.
There were 30,457 unsold homes on the market last month, according to figures released Wednesday by Metrolist, which tracks homes sold by Realtors.
That eclipses the record set in April, when 29,045 homes were on the market, and it is almost 21 percent more than the 25,198 homes available in May 2005, according to reports released by Steve McGuire of RE/MAX Professionals and independent broker Gary Bauer.
The ever-growing number of "for sale" homes competing with one another is being fueled by foreclosures. Blame overbuilding, a loss of high- paying jobs and rising interest rates, experts say.
"I'm just floored by these numbers," said Kurt Poole, principal of Metro Brokers/Poole Properties in Highlands Ranch. "It's hard to find anything positive to say about the home sales market."
Poole noted that he has been saying for the past two years that the market is at the bottom and should start to creep up.
"But clearly it is not at the bottom yet," he said. "It seems bottomless."
June 09, 2006
Denver: "But clearly it is not at the bottom yet - it seems bottomless."
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16 comments:
denver crashed in the late 80's so hard that everyone there was disgusted with housing. that's what has to happen worldwide now. then it will be safe to get back in the water.
I agree that there are many places in which property is over priced by varying degrees and others in which prices could be expected to pull back or stagnate in the face of rising interest rates and other factors. Some places may well experience a "crash".
However, I do not see why there has to be a worldwide crash. In a number of countries (especially emerging economies and places were land is in short supply) demographic factors, rising income levels and economic liberalisation have the potential to keep the trend moving in an upward direction over the medium term (short term volatility is another matter).
there will be a crash anywhere in the world where rampant speculation fueled by too low interest rates raised the price of housing beyond the fundamentals - where rent = ownership cost, where housing remains affordable for the working population, and where housing prices are at or near the historical mean.
any other situation, watch out below as we get back to where we belog
The Denver market has been dead for 3 years with growing inventory up 21 percent in ayear. In the true bubble markets inventories are up 300 percent or more, basically what Denver went thru in 2002. The question is will Phx, mia, sd, etc just see a long period of zero price growth(like denver has), or will higher mortgage rates kill demand completely. So far supply is up and demand is only down modestly. Soft Landing anyone?
supply is already out of control in denver, meanwhile, they're building hundreds and hundreds of overpriced new lofts downtown, adding fuel to the fire
watch out below
osman - if you're out there, what do you think of the denver market? how soon until I can get that sweet loft at 50% off the high downtown?
traineeinvestor...are you serious about the "land in short supply" comment? Ask a Japanese how the real estate market is. They have less raw land than the majority of the countries in the world and they have watched as real estate prices have plunged for 15 straight years!!
"or will higher mortgage rates kill demand completely."
Thats the difference here, Many markets that softened did so at the height of low interest rates and lax lending. Now softening markets are facing a much different environment. Look at the stock prices of HB's, does that look like a soft landing?
The stock market is predicting a recession in the 4th quater, job losses plus tons of inventory equals home price crash.
Colorado is still the #1 destination for U Haul trucks. I personaly know three people going there to buy with money from their LA houses. I think It's stable.
I live in Denver, and I'm seeing the LA and NYC folks come here and say, gee, housing sure is cheap here! Then they buy a LoDO loft for $450/sq ft. My view? They made a killing on RE in LA or NYC and now they are going to give it all back in Denver.
I've been here since 1978 and went through the crash in the late 80s. It was unbelievable. People now have NO IDEA of what lies ahead of them. When the supply gets too large (like now) and the buyers disappear you can not GIVE RE away. The psychology gets so negative no one will buy unless it is 50% off. I bought a 4 plex in 1985 for $105k, 3 years later an identical property next to mine was sold by the real estate owned dept of a bank for $45k. That's what it's like.
Denver has the largest economy in the korn belt. There are unlimited jobs for California folks. People want to live there no matter what it costs, and the locals are happy to see them coming!
Denver is a fool's errand. There isn't enough water to supply the population living there now, but the Democrats are hell-bent to increase the number of voters so they can take over the state government and put more Ds in Congress. They made it a "sanctuary city" and are inviting all manner of illegals and dead-beats to live and more importantly, VOTE there.
Yeah, it's a real mecca...
jury is still out...
real estate will go down over the next 10 years in real terms. you can take that to the bank.
in nominal terms? i don't know, but i wouldn't buy for at LEAST a year and probably more like 2 or 3.
most people haven't even reached the anxiety stage. when regular people have to sell because of job changes, divorces, etc and they start feeling the change in market... that's when the ball will get rolling.
right now it's just those "greater fools" who rushed in late to the party that are panicking.
i'm in Phoenix/Scottsdale
Regarding the "land in short supply" comment, yes I am serious. Take London, Sydney and Hong Kong (being 3 cities that I am familar with). All have a shortage of land in central locations (on the outskirts is another matter) relative to the demand for it. All of these cities have experienced overvaluations followed by price falls in the past that could be described as "crashes", usually caused by rising interest rates and a general economic slowdown. However, they have always recovered. Sure, sometimes it can take a long time to recover which shows that even where land is in relatively short supply prices can get too high (even becoming a bubble as in the case of Japan in the 1980s or Hong Kong in the 1990s). Hong Kong last peaked in 1997 and did not reach its low point until the SARS epidemic in 2003. For investing purposes, downturns in markets which have limited land supply are a welcome opportunity.
My point is not that such markets (or any market) are immune from becoming overvalued or from price declines, but that not every market in the world is at the same point in a property cycle. Some of the emerging markets are experiencing rapidly rising income levels which are in turn producing a demand for better quality accomodation - of which there is currently a shortage in some places. China is a good example of this - the government has taken steps to cool markets that have overheated as an emerging middle class has started pouring their savings into real estate.
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